Payroll’s Guide to 2016 Form W-2 Year-End Processing

Even though tax year 2016 did not see major legislative changes related to payroll processing, the significant effects of the Protecting Americans from Tax Hikes (PATH) Act of 2015 is undoubtedly on the minds of all payroll professionals.

Consequently, on top of the multiple other year-end tasks to be tackled, payroll professionals must start their withholding and tax payment reconciliations and Form W-2 data-checking processes much earlier this year to ensure the information entered on the forms is correct before distributing them to employees and filing them with the SSA.

This month-by-month guide will aid your organization by highlighting the key 2016 Form W-2 processing steps that will help payroll keep it all under control.

November

Right now, prepare to file Forms W-2 with the SSA by the earlier deadline and distribute copies of the forms to each employee by taking the following steps:

Be proactive by resolving potential Form W-2 errors now, before completing the forms. The most egregious errors employers make include:

Entering incorrect or misspelled names or nicknames;

Using titles or academic degrees before or after names; and

Entering names that have changed but that employees have not reported to the SSA.

To prevent these errors, ask employees to review their names, addresses and Social Security numbers (SSNs) on their pay stubs to verify that they are correct and to promptly notify the payroll department of any changes. If an employee’s name has changed, continue to use the old name and ask the employee to contact the SSA to obtain an updated Social Security card if he or she has not already done so. Do not change payroll records until after the employee obtains an updated Social Security card displaying the new name. Also, verify that employees’ names and SSNs match by using the SSA’s Social Security Number Verification Service (SSNVS), available via BSO.

January

By January, the task of actually completing the forms should be well underway.

If the employer offers pretax deductions, prepare and distribute a notice for employees explaining the calculation of the figures in Boxes 1, 3 and 5 on Forms W-2. In addition, review the forms for employees who have:

If applying for a hardship waiver from electronic filing, file Form 8809 with the IRS.

After filing and delivering the forms to all employees, process any employee requests for duplicates without charging any processing fees.

February

Once the W-2s are finally out the door, promptly make and file any needed corrections to ensure employees have the proper information for their personal income tax returns, which they must file with the IRS by the April 2017 deadline.

This is the time to prepare Form W-2c, Corrected Wage and Tax Statement, for employees whose Forms W-2 contained a withholding error of at least $25, and for those who ask for a corrected form regardless of the error, and attach a copy to Copy D of the employees’ W-2s. And finally, tell employees to attach their Form W-2 and Form W-2c, if any, to their Form 1040, Individual Income Tax Return.

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